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Sprint Needs Two Years for a Turnaround

October 02, 2013 | About:
Neha Marwah

Neha Marwah

1 followers
The U.S. wireless market is becoming extremely interesting to keep an eye on. The recent combination efforts undertaken by both Sprint (S) and T-Mobile (TMUS) have made it pretty clear that the two smaller national carriers are working to challenge the duopoly of Verizon (VZ) and AT&T (T). While the fourth-largest U.S. telecom provider joined forces with regional carrier MetroPCS, Sprint sold 78% of its share to Japan-based telecom player Softbank. In fact, Softbank has raised its stake to 80% in Sprint.

The Kansas carrier has taken several steps to fix its dismal condition that it suffered following its miserable combination with Nextel. Finally the third-largest U.S. mobile operator’s misery came to an end with the Nextel network closedown in June 2013. That was quite a busy period for Sprint as the very next month it completed its long-awaited combination with the Japanese player. Not only has Sprint joined hands with Softbank, but it also made a strategic acquisition of the spectrum-rich Clearwire to amass its huge swath of airwaves to roll out the Network Vision.

Catching Up with the Bigger Rivals

The most awaited device of the season, Apple (AAPL)'s iPhone 5s and 5c hit stores on Sept. 20, and Sprint launched the smartphone on its network on Sept. 21. While T-Mobile introduced the early upgrade program Jump, AT&T followed with Next, and Verizon launched its Edge, Sprint came out with One Up upgrade program. This program allows subscribers to upgrade their smartphones once in every 12 months and also gives the users unlimited speed on its 4G network. The carrier is also offering the iPhone at $100 lower than other players in order to attract customers from fellow rivals, Verizon and AT&T in particular.

Increasing customer base is extremely crucial for Sprint as it lost several subscribers due to the Nextel shutdown. Competing with the larger national player isn’t an easy task for Sprint. But the company is confident that it would shake the dominance of the two with the financial backing of Softbank and the much needed spectrum from Clearwire.

Two Years in the Making

Softbank’s Founder Masayoshi Son has asked investors to be patient for a couple of years during which it would build Sprint and make it emerge as a real challenger to the Big Red and the Dallas carrier. This has disappointed investors who were expecting a much quicker turnaround. Son said that Sprint’s customer base has been shrinking for years and it would take sometime to witness decent subscriber growth to fight Verizon and AT&T. He said that “for anything substantial you need one or two years”.

Not only is the two year period bothering investors, but the acquisition of the money losing carrier Clearwire is also worrying them. There is no doubt about the huge mass of spectrum that Sprint holds through Clearwire. These airwaves would be extremely important for Sprint for rolling out the 4G LTE and expanding the speedy network. But investors are concerned if Sprint will be able to bear the build out process which is expected to be massively expensive. The Kansas carrier is already incurring huge expenditure on its network upgrading process.

Looking Ahead

Investors look worried, but I believe that Sprint has huge potential. It is a perfect stock for patient investors. Son is known for turning struggling businesses into huge hits. It took him a year to turn Vodafone’s fortune. For Sprint, Son has targeted a time period of two years in which it plans to pull up the subscriber base and strengthen the carrier to contend other national players. Sprint’s effort to regain and expand customer base is very evident from its One Up upgrade program. It would be interesting to see how Softbank and Sprint work together to increase competition in the U.S. wireless market.


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